December 24, 2018 - MDT Pro Tips A.M.

CURRENT POSITIONS:

GOGO Long at $19.93
Total Premium Collected $1.95
 
ASNA Long at $14.20
Total Premium Collected $0.75

DUST Long $4.50
Total Premium Collected $0.70

SNAP Long at $14.54
Total Premium Collected - $1.65

OI Long Feb $19 call @ $1.70

MDR Long @ $9.31

PHM Long Dec $25.50 put @ $0.80
PHM Short Dec $24.00 put @ ($0.35)

ZEN Long Jan $55 call @ $2.30
ZEN Long Jan $50 put @ $1.60

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You should have been able to close out the long $25.50 put on PHM on Friday with the suggested order.  If you were able to watch the market, then it was not necessary to close out the short $24 put because the stock settled about $1 above that strike.  But if you did close it out for a nominal amount, it is not a big issue.

With the downspike on Friday, the overall loss on the position was mininal.

As I mentioned Friday, PHM seems to be the only stock not dropping during this pullback.   And certainly a stock you would expect to drop with all the negative news facing the real estate market.

Before I begin today, I need to mention the schedule this week.  Today is an early closing.  The market closes at 1:00 EST.

And tomorrow, of couse the markets are closed for Christmas.

Based on the schedule for this week, the next update will be on Thursday.

I do want to wish you and your family a Merry Christmas.  

The market slide continues.

As I mentioned, bear markets tend to close at the low end of the bar.  And Friday demonstrated that on the weekly bar.  I had mentioned that the weekly average true range on Friday was 96.26 points and through Thursday, the range was 160 points.   This suggested that perhaps the range for the week was already in.

But, I also suggested that there should be a retest of Thursday's low which was 2,441.18.

And Friday, the low for Thursday was taken out at 12:30.  After that, the market rallied back to a high of 2,456.63.  From there, the S & P 500 dropped to a low of 2,408.55.

That was a drop of 48.08 points.  On the SPY, it was a drop of 4.93 points.  And with the move happening last in the day, the leverage on options that expired Friday were tremendous.

But, the point is that price expectation suggested a low close percentage and after violating Thursday's low, you would certainly expect a retest of the Friday's low.  And that is what happened.

So, the weekly price bar ended up being 192.58 points.  This was almost double the weekly average true range.

That now suggests that the weekly price bar was a long range candle.

And with a close percentage of 4.2%, the odds of violating last week's low of  2,408.55 before the high is almost 100%.

And with a long range candle, there should be strong resistance in the 2,503 to 2,505 area.

For the day Friday, there was also a low close percentage.  It closed at 8% of the daily bar.  So, this also suggests that the low Friday will be violated before the high.

The daily range was almost 100 points and for the day, the market closed to the downside 50.84 points.

So, what does all this mean?

Well, quite frankly it does not bode well for the market.

I cannot recall more bearish price action.  Perhaps back in 2008.

But, as I have also said, our resistance levels should help to confirm that the slide will continue.

And one of the levels I mentioned was 2,437.50.  And Friday was the first close under it.

A close today under 2,437.50 will suggest a drop to 2,312 and possibly to 2,250.

You may recall that I mentioned the new downside target for this market is to 2,250.

The other key fact at the moment is that the midband on the weekly chart is 2,266.86.

Friday closed again under the lower band on the daily chart.  This was the third consecutive day that closed under the lower band.

The lower band is 2,514.22 and Friday closed about 100 points under it.

This shows you how oversold this market has become.

But, because the market is under the lower band, it does not mean you go long at this point to trade the bounce.  There will be an opportunity for that at some points.  Just not now.

But, this also suggests that we will most certainly see a retest of the lower band once the market manages to close above it.

The number of individual stocks trading under their lower bands are growing too.  Thursday, there were 426 stocks under the lower band and Friday, it jumped to 478 stocks.

The number of oversold stocks continue to grow.

Pre open, the market is trading about 7.50 points lower.  This should put the open right around Friday's low.  Watch the low of 2,408.55.

So much for a Santa Claus rally.

Anyway, Merry Christmas!

Continue to monitor the levels as I mentioned above.

Here are the Key Levels for the Markets:

$VIX: 
 
Major level: 43.75
Minor level: 40.63
Minor level: 34.38
Major level: 31.25 <
Minor level: 29.69
Minor level: 26.56
Major level: 25.00 
Minor level: 23.44 
Minor level: 20.31 
Major level: 18.75 

The VIX closed at 30.11, up 1.73 on the day. This puts the VIX above its upper band on the daily chart which is 28.49.

At this point, I expect a test 31.25.

With the VIX overbought now, a close under the upper band could be the pattern to suggest dabbling long in the market.

28.13 should be support.

SPX: 

Major level: 2,578.10
Minor level: 2,558.58
Minor level: 2,519.53
Major level: 2,500.00 
Minor level: 2,484.38 
Minor level: 2,453.13
Major level: 2,437.50 << 
Minor level: 2,421.88 **
Minor level: 2,390.63
Major level: 2,375.00

Not only did the S & P 500 close under the major 2,437.50 level, it managed to close under the minor 2,421.88 level as well.

So, how do we interpret this?

First off, a close under the major 2,437.50 level today would suggest a drop to 2,250.

And a close today under the minor 2,421.88 level would suggest a drop to 2,375.

If the market could close under 2,437.50, but above 2,421.88, it would create a scenario where the bounce should be short with a expectation the market will drop lower. 

2,500 should now be resistance.  And minor resistance is at 2,437.50.

QQQ:  

Major level: 168.75 
Minor level: 167.19 
Minor level: 164.06 
Major level: 162.50 
Minor level: 160.94 
Minor level: 157.81 
Major level: 156.25 
Minor level: 154.69 
Minor level: 151.56
Major level: 150.00 <
Minor level: 148.44 **
Minor level: 145.31
Major level: 143.75

The QQQ closed at 147.57.  It was the first move under the lower band on the daily chart.  The lower band is 147.48.

At this point, I don't see any rally going above the 162.50 level.  It if can, it would tell us that something is changing.

A close today under 148.44 and the QQQ should drop to 143.75.

IWM:
 
Minor level: 145.31
Major level: 143.75 
Minor level: 142.19 
Minor level: 139.06
Major level: 137.50 
Minor level: 135.94 
Minor level: 132.81
Major level: 131.25
Minor level: 129.69 **
Minor level: 126.56
Major level: 125.00

The IWM closed at 128.37.  It closed down 3.42 on the day.

A close today under 129.69 and the IWM should drop to 125.  

Resistance is at 134.38 and 137.50.  And now at 131.25.

TLT:  

Major level: 123.44
Minor level: 123.05
Minor level: 122.27
Major level: 121.88 <
Minor level: 121.49 **
Minor level: 120.70
Major level: 120.31 <
Minor level: 119.92
Minor level: 119.14 
Major level: 118.75
Minor level: 118.36

The TLT hit the 120.72 and sold off.  The TLT dropped to a low just above the 120.31 level.  This should offer support.

A break under it, and look for the TLT to continue to drop.  But, I do expect support there.

The daily chart continues to move closer to an uptrend.

GLD:  

Major level: 121.88
Minor level: 121.10
Minor level: 119.53 
Major level: 118.75 <
Minor level: 117.97 **
Minor level: 116.41 
Major level: 115.63 <
Minor level: 114.85 
Minor level: 113.28 
Major level: 112.50 

The GLD closed at 118.72.  To move lower, it will need two closes under 117.97.

The GLD is inching closer to the midband on the daily chart which is 120.21.  This level should be resistance.

XLE: 

Major level: 68.75 
Minor level: 67.97 
Minor level: 66.41 
Major level: 65.63 
Minor level: 64.85 
Minor level: 63.28 
Major level: 62.50 <
Minor level: 61.72 **
Minor level: 60.16
Major level: 59.38
Minor level: 58.60
Minor level: 57.03
Major level: 56.25

The XLE closed at 56.11.  It was the fourth day trading under the lower band.

This tells us to expect a retest of the lower band once the XLE does bounce.

The XLE has now had two closes under 59.38.  This suggests it could drop to 50.

The XLE is oversold, so it may bounce before heading lower.

FXY:

Major level: 85.94
Minor level: 85.75
Minor level: 85.36 **
Major level: 85.16 
Minor level: 84.97 
Minor level: 84.58 
Major level: 84.38 
Minor level: 84.18 
Minor level: 83.79  
Major level: 83.59 

The FXY close at 85.87 again.  It should test 85.94 or  possibly 86.72.

I do think the 86.72 level could offer strong resistance.

And 86.66 is the midband on the daily chart.

AAPL:

Minor level: 173.44
Minor level: 170.31 
Major level: 168.75 
Minor level: 167.19
Minor level: 164.06
Major level: 162.50 
Minor level: 159.38
Minor level: 153.13
Major level: 150.00 <
Minor level: 146.88
Minor level: 140.63
Major level: 137.50

Apple closed at 150.73 yesterday.   It did hit the 150 level.  A break under 150 and Apple should bounce a bit.

Next downside level to watch is 146.88.

162.50 should be resistance.  I do think Apple will ultimately drop to 135.

WATCH LIST:

Bullish Stocks: DOG, SDS, SH, SNOW, SQQQ 

You know the market is in trouble when the trending stocks are all short ETFs.

Bearish Stocks: GOOGL, BA, CHRT, NFLX, NOC, SPY, MLM. FDX, BIDU, GD, STMP, WEX, BABA, NVDA, CMI, FB, LRCX, JAZZ, CVX, CXO

Be sure to check earnings release dates.